The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5% in July.

The July level of 219.964 (1982-84=100) was 5.6% higher than in July 2007.

On a seasonally adjusted basis, the CPI-U advanced 0.8 percent in July, following a 1.1 percent increase in June. The index for energy rose sharply for the third straight month, increasing 4.0 percent in July and accounting for about half of the overall increase in the all items index.

Core CPI, the index for all items less food and energy, increased 0.3 percent in July, the second straight such increase.

Abstract: Both the Bureau of Labor Statistics (BLS) and the Bureau of Economic Analysis (BEA) produce measures of the change in prices that consumers pay on the goods that they consume. While these measures tend to agree in broad historical trends in prices, they sometimes give different pictures of inflation over short horizons.

There are several reasons why these two indexes differ. First, the two indexes use different formulas. For the period in question, the CPI is a Laspeyres index, while the BEA product is a Fisher Ideal index. Second, the two indexes have different underlying concepts. The BLS product measures the prices paid by (urban) consumers, while the BEA product measures the prices of final consumption goods, wherever they are purchased. Finally, even when there is significant agreement across indexes in the broad outlines of coverage, differences in how the detailed components are implemented lead to differences in how prices are measured and differences in the weights attached to specific series.

We quantify the magnitudes of each of these factors. There is no one “smoking gun” that explains the discrepancy between the indexes. Rather, the overall discrepancy is the result of the accumulation of a number of small effects.